Transcript Illinois’ Plan for Protecting our Excellence

Stewarding Excellence
@ Illinois
Campus Presentations
February, 2010
The Perfect Storm
• A worldwide financial crisis and an already weak
state
• Significant long-term financial challenges for the
state
• An overextended institution with limited cash
• Facility and other costs that can not be deferred
How do we best move forward in a
way that protects our institution?
State Financial Issues
• The state’s General Revenue Fund appropriation is
approximately $26 billion for operations.
• The state started FY 2010 with $2.8 billion in unpaid
vouchers. There is no revenue source to pay these
past due bills.
• The state used one-time funds ($5.7 billion from
borrowings, $2 billion stimulus funds, $300 million
fund sweeps) to help cover this year’s costs.
• Even with these one-time funds, the state slips
further behind with its payments.
The state will start FY11 with a minimum
shortfall of $9 to $13 billion—or 35% to 50% of
the state’s operating appropriation!
Budget Context
Status of FY10 State Budget
• Short-term solutions will get us through at least part
of year.
• Stimulus funds ($45.5m) used in University
appropriation.
• The State is 180+ days behind on payments – a great
risk to our institution
FY 2010 Budget Outcomes
• On the surface things look good:
– No GRF Reductions
– Significant growth in tuition revenue
• However, significant risks exist:
– State revenues continue to decline
– Shortfall may require action at any time
State of Illinois
Longer-term Financial Issues
State Support Per Tuition Dollar
FY 1970 to FY 2009
12.8 to 1
8.6 to 1
4.5 to 1
2.9 to 1
1.5 to 1
1.4 to 1
1.3 to 1
1.2 to 1
1.1 to 1
FY02-09 excludes health insurance re-direction to CMS.
We have become increasingly self-reliant for direct operating costs.
UIUC
FY00 - FY10
General Revenue Funds and Payments on Behalf
600
State pension “catch-up” is consuming
all new revenue.
500
Amount in Millions
400
Direct appropriation is flat in recent
years
300
200
100
“Payments on Behalf” are state contributions to pension
system and health insurance.
0
FY00
FY01
FY02
FY03
GRF
FY04
FY05
Payments on Behalf
FY06
FY07
FY08
FY09
GRF + POB
State support for benefits now exceeds direct funding of operations
FY10
State Tax Appropriation
Changes by Agency
In Constant 2008 Dollars (CPI)
Elementary/Secondary
18.6%
12.0%
Human Services
3.7%
State Average
Higher Education
-24.1%
-32.0%
All Other
FY02 - FY09 exclude $45 million from higher education for Health Insurance payment to CMS.
Higher Education has done poorly compared with other state agencies
State of Illinois Debt
(Dollars in Billions)
$120
$100
$80
The state is faced with a
significant amount of
pension and bond debt
compared with the size of its
budget
$71.3
Pension Debt
$60
$40
$20
Bonded Debt
$0
GRF
Debt
Page 10
Real Gross Domestic Product by
State
1997 – 2008
(Millions of Chained 2000 Dollars)
The decline of manufacturing has
held back growth in Illinois
compared to the nation
*Average of top five performing states.
Source: U.S. Bureau of Economic Analysis.
Stimulus Funding:
Short-term help; Long-term risk
Operating
• $45.5m shortfall in FY10 University budget funded
with stimulus funding
• State can’t cut FY10 operating below FY08
• These stimulus funds are gone in FY11; state must
have new revenue to cover
Stimulus Grants
• Research funds provide 2 year opportunity
• Federal deficit may not allow indefinite funding
Summary of State Financial
Issues
• Uncertainty regarding needed tax increase
• State is 180+ days behind on payments to the
University
• Stimulus funding runs out this year
• Pension system dramatically underfunded
Total risk to campus is many tens of
millions of dollars!
Campus Financial Challenges
UIUC Year-End Operating Fund Balances (millions)
$250.0
$200.0
$150.0
$100.0
Dramatic increase in utility
costs ate into campus cash
balances
$50.0
$0.0
($50.0)
($100.0)
FY04
Total Balance
FY05
Institutional Total
FY06
FY07
Institutional Total (Excluding Utilities)
FY08
Self-Supporting Total
FY09
Gift/Endowment Total
How Do We Respond?
Planning Considerations
• Revenue
– State Funds—declining industrial base; significant
unfunded retirement costs
– Tuition—One of the highest cost publics; cost
growing beyond capacity to pay
• Expense
– Personnel—80% of total costs
– Utilities—significant cost growth in recent years.
Facilities still require investment
– Financial Aid—major investment required
Planning Considerations (cont.)
• Buildings/ Maintenance
– State stopped supporting facilities in 2002
– Campus stepped up to cover desperately needed
remodeling and facilities
– Deferred maintenance of $550 million!
– Below average $ per square foot to maintenance—
and it shows!
Planning Considerations (cont.)
Many Strengths:
•
•
•
•
High quality faculty, students & staff
Fee support for facilities & Library/IT
Stabilized utility costs—both price & conservation
Aggressive pursuit of stimulus grants
Covering the Shortfall
• Cut the cost of our operations: purchasing, IT, space.
• Reduce our footprint in a selective way: eliminate,
downsize or reorganize some activities
• Highly differentiated unit budget reductions based on
a number of factors, such as:
– Duplicative activity
– Strategic need
– Source of funds
• Funds already set aside
What We Have Done So Far
• Communication and Planning
– Kickoff meetings with all colleges to outline scope
of problem
– College planning efforts to address reductions
• Aggressive cost reduction
– First stage of administrative reductions—$1.3m in
savings
– Accelerated energy conservation efforts—millions
in annual savings
• Increased financial oversight and reduced deficits
What We Have Done So Far
(cont.)
• System-wide University of Illinois (UA)
Administrative Review Committee
– Exploring next steps for strategic procurement, IT
efficiencies & service centers
– Review administrative structure for possible
streamlining
• Campus: Stewarding Excellence @ Illinois
– Formed central teams
• Steering Committee—deans, campus leaders
• Campus Advisory Group— faculty, staff, students
• Project Mgt. Team—campus admin. staff